Bridge that Gap: Great Central Railway News

Fixed price isn't necessarily as secure as you suggest.

 

As it happens, I do (it's my day job). I agree no price is ever fixed, but the more risk that is priced and fixed, the more certainty there is.

Yes, you need to pay more to get more fixity, but you can fix it a lot more than most HS2 contracts were.

 

I'd agree on HS2. I'd suggest that the fiasco of the Edinburgh trams shows how tricky it can be to cost those risks properly, and get the right result. I do also recognise that civils may well be more amenable to properly costed risks than my world (commercial IT).

 

AIUI, Edinburgh trams fiasco was caused by a total failure of the council to understand and manage their contract.

Civils are less susceptible than (AIUI) IT for eg version/technology change (nobody has updated soil to the best of my knowledge), and you have mucb less risk of "why don't we get it to do x"-itis. However the ground is fundamentally unknown until you dig it.

The critical point is to de-risk as far as possible, doing surveys/boreholes/trial piys etc. The advantage of telling the contractor they get no more money for ground is to make them much more incentivised to get it right first time. (Equally, you need them to have the time and the resource to do the investigations).

None of it's rocket science, but the rush to start and the short-term gains of risk-sharing seem to blind everyone to these facts every time.

 

I'm aware of a large civil engineering job that was 2/3 complete, at which point the principle contractor said, due to the rising cost of materials (as a result of Brexit and COVID) they could not complete the job as originally costed- but would finish the work on a cost+ percentage basis to mitigate the risk.

 

Precisely my points - and why I'm far from convinced that a fixed price is any more than part of the jigsaw when making sure that a contract will deliver to time and budget. I can well believe that civils are much less susceptible than IT, given my experience in the IT industry is that customers are a) commonly very unwilling to pay for discovery work and b) very poor at understanding the implications of late changes.

 

a) and (b) are pretty much universal... luckily enough civils clients are repeat buyers who invest in, and trust, their consultants.

Of course the contract isn't the whole picture, but it's amazing how often laying everyone's duties and liabilities out and having them sign them and not accepting "oh we'll just manage that" or "it'll never happen" flushes a lot out.

I have only once seen an NEC option C arrangement (a target cost-based contract with pain/gain shares) deliver real value was where the client invested in a pm team that was as big as the contractor's.

I'm sure the GC team have looked into all this, but in the same way that I don't specify materials, I hope they have had their contracts drawn up by an appropriate professional.

 

And if they'd be going cost+ from the outset, why would that be better?

 

Most if not all large contracts have clauses related to the price of raw materials, so if they increase (which they always do) so does the contract price, linked to the London Metals Exchange https://www.lme.com/en/ or similar, may well be clauses for energy and building materials, cement, sand gravel etc.

 

the obvious example there being the ‘slight’ financial impact on Nuttalls of their complete misreading of what they were likely to find when they built the (original) Lynton and Barnstaple…

 

This is somewhat harsh on the EA. As an Environment Manager with 20+ years of seeking permission for developments / Environment Permits (and also a Friends of the GCR member), EA have done nothing extraordinary here. Though if anyone from the GCR reads this, the EA consultation highlights potential requirement for an Environment Permit for works due to watercourse proximity and if (as the site location plan seems to show) they are that close to the Hermitage brook I'd thoroughly recommend approaching the EA up front over that. Planning permission does not automatically mean granting of an Environment Permit for works.

https://planningexplorer.charnwood....f&aspectGuid=B8EAB13BDE524DC7985616B5538DDC7F

 

Sure. I did say that it was purely my own opinion, and that it might well prove unpopular

 

Fixed price only ever works if you have a VERY well defined specification, plus I would suggest on any construction project no contractor will be prepared to absorb the "unknowns"

So in many ways fixed price is just a PR myth.

 

Throughout my professional career I’ve always done fixed price contracts. What should also be included in the contracts are extras for any known possible variations and rates for any additional unforeseen work which are paid against signed timesheets. Even in this business when specifying boiler contracts I ask for a price for doing additional stays, changing rivets, etc so that anything that can’t be quantified at the start is covered by the contract at a previously agreed rate. Materials costs are covered by invoice price plus a percentage, again in the contract. Even though the final cost may not be known they are all in effect a fixed price because the rates are agreed in the contract. That’s the only way to avoid being taken for a ride on the inevitable extras.

 

With regard HS2 one contractors CEO pointed out the design was incomplete, design was also changing, very little ground investigations had been carried out and the full extent of the services to moved was not known.

 

As Steve says. Fixed price contracts have variation provisions in them. Fluctuations (of which material price changes are a sort) come and go.
A lot of it is down to commercial positions, but I've yet to see the paying party do better under a cost-plus contract than under a well-scoped and properly understood fixed-price arrangement. (And if you don't know and understand the scope, why are you buying it?)

 

So the question is then "why the heck did the procuring authority think this a good idea to let the contract"?

For a variety of good, bad and indifferent reasons construction and civils are very expensive in this country. Anyone not understanding this and planning accordingly should not be let near any project involving a spade in the ground

 

Yes, but that's not becuase the earth was upgraded to Soil 2.0 during the tender. It was discoverable, and they didn't discover it. Why should that come back to the railway?

 

Because ultimately a contract is a commercial deal. In a situation where a contractor can't afford to deliver, the client also has a problem as the previously unknown information is now out in the open.